Prices to Buy Gold fell Wednesday morning in London, dipping below $1584 per ounce – a 1.5% drop from the previous day's all-time high – while stocks and commodities continued to recover after losing ground for much of the last week.
US Treasury bonds fell despite President Obama's endorsement of a deficit reduction plan crafted by a so-called "Gang of Six" US senators.
Beijing today called on the US to act responsibly. China also repeated its assertion that it has no large scale plans to use its foreign exchange reserves to Buy Gold.
"Slips [in the price to Buy Gold ] should find support around the previous all-time high, made in May around $1577.50, or along the breached May to-July resistance line at "1549.07," says Axel Rudolph, senior technical analyst at Commerzbank.
"Only a close [on Wednesday] below $1577 will introduce a deeper correction," agreed technical analysts at bullion bank Scotia Mocatta.
The price to Buy Silver also fell Wednesday morning, hitting $38.38 per ounce – 2.3% down for the week so far.
President Obama on Tuesday endorsed a bipartisan deficit plan by a so-called "Gang of Six" US senators, describing it as "very significant step".
"We're in the 11th hour and we don't have a lot more time left," said Obama, adding that it was time for congressional leaders to "start talking turkey". The US Treasury says it will hit the $14.3 trillion debt ceiling on August 2. Obama wants Congress to raise it to $16.8 trillion.
Obama's comments were something "the market could hang onto," says James Steel, precious metals analyst at HSBC.
"The [gold] market had gotten very long and it did begin to steady out over $1600...we haven't seen heavy fresh selling."
Few details of the "Gang of Six" plan have emerged so far. News agency Reuters reported on Wednesday that the senators envision $3.75 trillion of savings spread over 10 years. By comparison, the Congressional Budget Office has forecast the total deficit for 2011 will be around $1.5 trillion.
The Republican-controlled House on Representatives meantime passed the so-called Cut, Cap and Balance Act on Tuesday – which calls for balanced federal budgets to be enshrined in the US Constitution before the debt ceiling can be raised.
The bill is expected to fail in the Senate, and Obama has said he would not sign it into law.
"We hope the US government will take responsible policies and measures to boost global financial market confidence and respect and protect the interests of investors," said a statement from China's State Administration of Foreign Exchange on Wednesday.
SAFE also played down the extent to which it might Buy Gold and other commodities with some of its $3.2 trillion of foreign exchange reserves – repeating its line that doing so would hurt Chinese consumers.
"Chinese companies and households consume a large amount of gold and crude oil...we could push up market prices, which may affect our people's consumption and economic development."
Here in Europe meantime, German chancellor Angela Merkel said Tuesday that this week's emergency European Union summit on Greece will not be "one spectacular event which solves everything."
Eurozone ministers are due to meet in Brussels on Thursday to discuss options for second Greek rescue – following last year's €110 billion bailout.
One option under consideration involves using the European Financial Stability Facility – the Eurozone's €440 billion temporary bailout mechanism – to buy back sovereign bonds on the open market.
"Much uncertainty remains ahead of the European Union leaders' summit," says Andrey Kryuchenkov, London-based analyst at VTB Capital, who adds that persistent uncertainty is likely to keep the market to Buy Gold "underpinned".
"Any correction is unlikely to be extended for long."
"It seems unlikely that any real resolution can be found to this issue on this occasion," adds one Gold Bullion dealer here in London.
"The prospect is there for more buying of gold by risk-averse European investors."